American, US Airways merger on the horizon?

A global recession and a surge in fuel prices sparked a frenzy of airline mergers and acquisitions over the last decade as carriers joined forces to stay airborne amid economic turbulence.

Merger mania is not over. The biggest yet may now be in the works, combining American Airlines and US Airways into the nation's largest airline with up to 1,500 planes in its main line and regional fleets and more than 120,000 employees.

Analysts say a merger between Fort Worth-based American and Tempe, Ariz.-based US Airways could be announced as soon as January. It would produce a mega airline with an estimated value of about $8billion.

At Fort Lauderdale-Hollywood International Airport, American had 5.1 percent of the airport's passenger traffic this year through November, while US Airways had 6.9 percent, according to the latest airport data available. Combined, the airlines have about 12 percent passenger share, which would put them in the top five carriers behind Delta Air Lines.

For the 12 months ending in October, US Airways had nearly 14 percent of passenger boardings at Palm Beach International Airport, while American had 6.1 percent.

The airlines fly different routes from Fort Lauderdale as well from West Palm Beach, as such it's hard to predict any flight reduction fallout from a merger, officials have said.

At Miami International Airport, American had a 64 percent market share, while US Airways had 2 percent for the budget year ended Sept.30. Both carriers, however, fly from Miami to Charlotte and Philadelphia, according to airport officials.

Airline experts debated the financial merits of a merger, but they agreed passengers could face some short-term headaches if a deal happens.

"Mergers are never good for passengers because there are always disruptions," said Joe Brancatelli, an airline expert and online columnist on business travel.

If merger history is any guide, the integration of American and US Airways could lead to reservation system glitches, labor disputes and a cut in services to some markets, experts say. Airline mergers, they add, mean fewer competitors and thus higher fares.

"I believe merging the two companies would be at least a two-year difficult period with many challenges," said Ray Neidl, an airline analyst for Maxim Group, a New York investment banking firm.

Executives of the parent companies of US Airways and American Airlines are meeting behind closed doors and declined to comment publicly on a potential merger. But the union for American Airlines pilots, which supports a merger, says an integrated American-US Airways would fly more efficiently and offer more destinations.

Still, Tom Hoban, spokesman for the Allied Pilots Assn., concedes that "there are always going to be some operational challenges."

Indeed, airline mergers rarely run smoothly.

Dozens of United Airlines flights have been delayed over the last year because of computer glitches, apparently resulting from efforts to switch over to the reservation system formerly used by merger partner Continental.

Integrating labor groups, such as pilots, can also lead to problems, such as strikes and job actions.

US Airways completed a merger with America West Airlines in 2005 but has yet to get pilots and flight attendants from the two airlines to agree on integrated employment contracts.

By cutting competition, a merger between American and US Airways may push up fares but not significantly, said UC Irvine Professor Jan Brueckner, who coauthored a report on the effects of airline mergers. In the end, he said, cost savings created by the merger would more than make up for the higher fares.

"This impact is likely to be dwarfed by the network benefits enjoyed by passengers and by the cost synergies of the merger, some of which will eventually be passed on to consumers," Brueckner said.

American has been the subject of merger talk since AMR filed for bankruptcy in November 2011. US Airways has pushed for a merger, arguing that the two airlines can combine to better compete against bigger carriers such as Delta, which merged with Northwest in 2009, and United, which merged with Continental in 2011.

US Airways went so far as to persuade three of American Airlines' unions to back a merger. One of the key arguments for a merger is that US Airways' extensive service on the East Coast can help boost American's sparse presence in the region.